Financial Policies and Accounting Procedures Manual

Transcription

1 The Diocese of the West The Orthodox Church in America Financial Policies and Accounting Procedures Manual V5.00

2 Document Version History Version Date Author Description Of Change June 2003 Mary L Caetta Original February 2006 Mary L Caetta Added Direct Deposit instructions for Section III, Create Monthly Paychecks. Added information on preparing for the Diocesan Assembly. Incorporating red-line corrections to make procedures current June 2006 Mary L Caetta Added documentation as to current Internal Controls using The Church Guide to Internal Controls by Richard J. Vargo, published by Church Law and Tax Report. Presented to and approved by the Diocesan Council at June 6, 2006 meeting. V October 2008 Mary L Caetta Section 6 updated method of backup of Diocesan Files Folder Section 8 - Added description of Chart of Accounts and created policies relative to these accounts. Section 10 - included Administrative Assistant processing of checks and revised sections 10.1 and Section 11 added description of QB Online Bill Pay. Updated approvers to description of position rather than name of specific person Section 12.2 updated process for creating monthly paychecks. Section updated Process payroll Liabilities Section 13.1 updated Create a Quarterly IRS Form 941 Section updated draft letter for budget requests. Section 20 & 21-28Aug08 mailing list maintenance V September 2009 Mary L Caetta Section 1 - Purpose updated Section 6 - Changed to include recovery of Treasurer files from Diocesan Office. Section Updated Bank Account information. Section Added policy on parish assessment payment priority. Section Updated to reflect current accounts. Section Updated procedure for sending checks for payment of Pension Section Updated procedure for preparing Monthly Financial Reports. Section Revised to refer only to the preparation of assembly assessment invoices. Section 14 - revised to remove tasks performed by Admin. Section 17 - updated independent contractor reporting procedure. Section 20 - Mailing list maintenance deleted Page 2 of 93

3 Table of Contents 1 PURPOSE OF THIS MANUAL DESCRIPTION OF THE DIOCESE OF THE WEST GENERAL RESPONSIBILITIES THE TREASURER OF THE DIOCESE OF THE WEST DUTIES QUALIFICATIONS THE AUDITING COMMITTEE DUTIES QUALIFICATIONS FINANCIAL RECORDS & CONTINGENCY PLAN FINANCIAL REPORTING POLICY THE CHART OF ACCOUNTS ASSETS Unrestricted Assets (QuickBooks Bank Accounts) Policy for Opening an Asset Account Account Balance Policy Clearing Account Policy Accounts Receivable Policy for Determining Parish Assembly Assessments Policy for Determining Parish Diocesan Percentage Assessment (Rev. 10 Oct 2002) Policy on Invoicing Parishes for the Fair Share Assessment Loans to Parishes or Institutions Policy on Personal Expenses Charged on Diocesan American Express Card Other Current Assets (Inventory) Other Current Assets (Unrestricted Cash) Petty Cash Policy Other Current Assets (Temporarily Restricted Assets) Temporarily Restricted Funds Policy Board Designated Funds Board Designated Funds Policy Fixed Assets (Land and Buildings) LIABILITIES Accounts Payable Policy on the use of the Diocesan Credit Cards Policy on the payment of vendor Other Current Liabilities Policy on the classification of clergy as employees Policy on participation in the OCA Pension Plan (TBD) NET ASSETS INCOME Policy on Receipt of Funds EXPENSES Lights on Expenses Wages (Clergy & Non-Clergy W2 Employees) Policy on Classification of Clergy as Employees Policy on Classification of Non-Clergy as Employees Lights on Expenses Stipends (Clergy & non-clergy Self-Employed Status) Policy on Classifying a Diocesan Worker as Self-Employed Lights on Expenses Employee Benefits Page 3 of 93

4 8.5.4 Lights on Expenses Payroll Taxes and Other Payroll Expenses Lights on Expenses Professional Fees Policy on Payment of Invoices for Professional Fees Lights on Expenses Office Expenses and Supplies Policy on Payment of Expenses for Office Supplies Lights on Expenses Travel Policy on Payment or Reimbursement for Travel Lights on Expenses Insurance and Property Expenses Lights on Expenses Clergy and Parish Resources Expenses Lights on Expenses OCA Expenses Lights-on Expenses - Department of Communications Policy on Payment of Department of Communications Expenses Lights-on Expenses - Diocesan Assembly Policy on Diocesan Assembly Expenses Outreach Expenses - Department of Missions Unrestricted Expenses Policy on Stipend Payments to Mission Priests Policy on Payment of Department of Missions Expenses Policy on Source of Funds to Pay Expenses Outreach Expenses Charities Department Unrestricted Expenses Policy on Management of Charities Department Budget and Expenses Outreach Expenses Youth Unrestricted Expenses Policy on Payment of Expenses for Youth Outreach Expenses Department of Stewardship - Unrestricted Expenses Policy on Payment of Expenses for Appeals Outreach Expenses Miscellaneous Outreach Expenses - Unrestricted Expenses Expenses from Temporarily Restricted Asset Accounts OVERVIEW OF TREASURER PROCEDURES DAILY/WEEKLY PROCESS INCOMING RECEIPTS ENDORSE RECEIPTS AND RECORD IN LOG PREPARE AND MAKE DEPOSITS RECORD A PARISH PAYMENT RECORD DONATIONS RECORD MISCELLANEOUS PAYMENT OR CHECK RECORDING A STEWARDSHIP PLEDGE RECORD DEPOSIT IN QUICKBOOKS GENERATE DONATION ACKNOWLEDGEMENTS DAILY/WEEKLY ENTER/PAY BILLS AND REIMBURSEMENTS ENTER BILL FROM EXTERNAL VENDORS FOR BUDGETED EXPENSES ENTER BILL FOR REIMBURSEMENT REQUEST (SUBSTANTIATED AND/OR AUTHORIZED) RECONCILE AND PAY CREDIT CARD CHARGES PAY BILLS ENTERED MONTHLY TASKS PAY MONTHLY STIPENDS AND PAYMENTS TO LGS AND MARTHA MARY HOUSE CREATE MONTHLY PAYCHECKS PAY PAYROLL LIABILITIES Pay Federal 941 Taxes Pay OCA Pension Liabilities Non-Employee Payment of OCA Pension Pay State Withholding Liabilities (CA, if applicable) GENERATE MONTHLY ASSESSMENT INVOICES AND ASSESSMENT STATEMENTS MAKE FAIR SHARE ASSESSMENT PAYMENTS RECONCILE ASSET ACCOUNT STATEMENTS PREPARE MONTHLY FINANCIAL REPORT Page 4 of 93

5 13 QUARTERLY TASKS CREATE A QUARTERLY IRS FORM PREPARE QUARTERLY, CALIFORNIA (EDD), WAGE AND WITHHOLDING REPORT, FORM DE ADDING/REMOVING A STIPEND PAYEE ANNUALLY FAIR SHARE ASSESSMENT Collect and Report Parish Membership Numbers (September 1 October 10) Update Memorized Monthly Fair Share invoice DETERMINE THE DPA ASSESSMENT Request of Parish to send Annual Financial Report and updated Mailing List. (December) Computing the Diocesan Percentage Annual Assessment (DPA) (As parish financial reports are received) Create Adjustment and Assessment Invoices for the Month PREPARE ASSEMBLY ASSESSMENT INVOICES (JULY) PREPARE DRAFT BUDGET FOR FOLLOWING YEAR (JULY THROUGH OCTOBER) CREATE STEWARDS OF THE WEST LIST FOR THE DELEGATE REPORT BOOK CREATE TREASURER S REPORT FOR DELEGATE REPORT BOOK (SEPTEMBER 1) PREPARE ANNUAL TAX AND RECONCILIATION FORMS Prepare Annual California (EDD) Reconciliation Statement (January) Create 1099 Forms and 1096 Annual Summary and Transmittal of U.S. Information Returns (Late December or Early January) Create W2 and W3 Forms (Late December or Early January) YEAR-END CLOSE (DRAFT) CONFIGURE QUICKBOOKS FOR THE DIOCESE OF THE WEST SET UP A PARISH AS A QUICKBOOKS CUSTOMER SET UP A DONOR AS A QUICKBOOKS CUSTOMER REPORTING NEW EMPLOYEES TO THE STATE OF CALIFORNIA (ANYTIME) REPORT INDEPENDENT CONTRACTORS TO THE STATE OF CALIFORNIA (ANYTIME) FILE A CALIFORNIA STATEMENT OF A NON-PROFIT CORPORATION (EVERY TWO YEARS) PREPARE FOR EXTERNAL REVIEW OF ACCOUNTS APPENDIX DOCUMENT RETENTION POLICY Page 5 of 93

6 1 PURPOSE OF THIS MANUAL This manual describes the policies, procedures and controls to be exercised in accounting and reporting the financial activities of the Diocese of the West. It is designed for use by the Treasurer of the Diocese of the West to facilitate compliance with policy and ensure consistent procedures are followed. Diocesan computer user ids and passwords are found in the Appendix, which is contained in a separate file from that of this manual. The Appendix may not be posted on any computer or internet site. A copy of this manual must be kept in the Office of the Treasurer as well as in the Diocesan Office. 2 DESCRIPTION OF THE DIOCESE OF THE WEST The Diocese of the West, Orthodox Church in America was established as a religious non-profit 501c(3) corporation in 1975 under the laws of the State of California. The Diocese of the West is a body of the Orthodox Church in America and consists of all parishes, mission parishes, missions, chapels and institutions of that Church within that Geographical territory defined by the Holy Synod of Bishops of the Orthodox Church in America as constituting the Diocese of the West. Currently, the Diocese has parishes in the states of California, Oregon, Washington, Montana, Colorado, Nevada, Arizona, and Hawaii. The Diocese is administered by the canonically recognized Bishop of San Francisco, currently His Grace Bishop BENJAMIN. The Board of the Directors shall be called the Diocesan Council. The principal office of the Diocese is located in the City and County of San Francisco, California at 1520 Green Street. 3 GENERAL RESPONSIBILITIES Treasurer of the Diocese of the West the Treasurer shall maintain this manual and shall provide a hard copy for review by the Diocesan Council and Diocesan Auditing Committee upon request. The Treasurer shall also provide a copy of this manual during the review of the financial records by an external auditor. The Treasurer and the Auditing Committee - responsible for ensuring that accurate records are maintained and the specified internal controls are in place and exercised. Cost effective internal controls have been selected to minimize expense to the diocese yet reduce the possibility of the misuse of funds. The Finance/Budget Committee assists the Diocesan Council in its oversight responsibilities relating to fiscal management. It shall prepare and recommend approval of an annual operating budget; regularly review financial results; ensure the maintenance of an appropriate capital structure; oversee the management of organization-wide financial assets. It shall regularly review this Accounting Procedures Policy and Procedure Manual, make recommendations for Page 6 of 93

7 policy revisions, and present revised versions of this manual to the Diocesan Council for approval. 4 THE TREASURER OF THE DIOCESE OF THE WEST 4.1 Duties According to the bylaws of the Diocese (30 October 1995), the Treasurer of the Diocese of the West shall be responsible for: the receipt, safekeeping, and proper disbursement of all money and other property of the Diocese entrusted to his care, according to the direction of the Diocesan Council rendering a statement at the Diocesan Assembly and at such other times as may be requested by the Diocesan Council. The annual statement shall be audited and certified as provided by these Bylaws shall maintain, or have maintained, such account books, records, and procedures as necessary to fulfill the needs of accountability to Diocesan authority and to such legal and civil authorities or entities with legally constituted interest in Diocesan financial affairs. Such accounts, records and procedures shall remain available for inspection by any member, at any time during normal hours, upon reasonable notification performing such other duties as may be imposed by law, the Articles of Incorporation, these Bylaws, and decisions of the Diocesan Council 4.2 Qualifications As specified in the bylaws, the Treasurer is appointed by the Diocesan Council from among its numbers. The term of office shall be for one year. The Treasurer must understand accounting principles and must be able to use QuickBooks accounting software to record financial transactions and create reports. The Treasurer need not be a professional accountant, but non-profit bookkeeping experience is desirable. The Treasurer must also be able to use Microsoft Word, Excel, Outlook, and . This position requires approximately 30 to 40 hours of work per week to properly exercise all responsibilities. 5 THE AUDITING COMMITTEE 5.1 Duties The Diocesan bylaws state that: The Auditing Committee shall be composed of three members, one clergy and two lay, preferably with accounting or bookkeeping experience, who shall periodically review the work of the Treasurer and of the financial aspect of the work of the Diocesan Council. The committee shall also audit and approve the annual financial report of the Diocesan Council before it may be mailed to the parishes. The Auditing Committee shall audit the financial records of all Committees of the Diocesan Council and all auxiliary Diocesan organizations. Page 7 of 93

8 The Audit Committee shall periodically review this manual and verify that the procedures, policies and controls specified are followed. The Audit Committee shall make recommendations as needed to ensure that the specified controls are adequate for the current operating environment. They shall also oversee the financial reporting process and the hiring and performance of the external auditors. 5.2 Qualifications The Auditing Committee shall be composed of three members, one clergy and two lay, preferably with accounting or bookkeeping experience. 6 FINANCIAL RECORDS & CONTINGENCY PLAN Current year paper records are stored by month in hanging folders in a rolling file box under the treasurer s desk. The office of the Treasurer is located at 22 Dunraven PL, Port Townsend WA The only items not scanned and stored on the treasurer s computer are the receipts submitted to substantiate expenses paid with the Diocesan Credit Card or to substantiate reimbursable expenses. The Treasurer is responsible for the maintenance of paper records according to the Document Retention Policy provided in the Appendix of this manual. All electronic Diocesan financial documents are stored on the treasurer s Gateway desktop computer, running the Vista Operating System, in a folder named Diocesan Files. This folder is backed up on a daily basis to an internet QuickBooks backup server. Restoring these files from the internet is very time-consuming. Thus the directory, Diocesan Files, is also copied to a USB Flash Drive on a weekly basis. That USB drive is sent to the Diocesan Office and stored with the copy of this manual. In the event that the Treasurer cannot fulfill the duties of the office, the files on the USB drive can be copied to a PC computer and a person, appointed by the Diocesan Council and skilled in the use of QuickBooks, can assume those duties. Paper files can be shipped to San Francisco by contacting the rector of St. Herman of Alaska Orthodox Church in Port Townsend, WA. Financial activity is maintained in a QuickBooks Premier Nonprofit Edition 2009 data file called Dowqbook.QBW. The path for the data file is Diocesan Files/Dowqbook.QBW. The password for this data file may be found in the Appendix to this manual. 7 FINANCIAL REPORTING POLICY Internal financial statements shall be prepared monthly by the Treasurer, reviewed by the Finance Committee, distributed to members of the Diocesan Council, and posted on the Diocesan website. In order to conform to standard non-profit reporting, beginning with the third quarter of 2008, the financial statements shall include, at a minimum, the following: The Statement of Financial Position (Consolidated Balance Sheet, QuickBooks classes all) The Year-to-Date Consolidated Statement of Unrestricted Activities (P&L Statement) against budget. (In QuickBooks, class is "Operating" and "Outreach".) The Statement of Temporarily Restricted Activities (In QuickBooks, class is "restricted") The Statement of Permanently Restricted Activities (when it becomes applicable) Page 8 of 93

9 The Statement of Restricted Fund Balances. (Extracted from Consolidated Balance Sheet) Report of Outstanding Parish Assessments It is the policy of this organization to use the accrual basis of accounting that recognizes revenues when they are earned and expenses when they are incurred. 8 THE CHART OF ACCOUNTS This section lists the current chart of accounts and account descriptions. This section may be amended as new accounts are added or existing accounts are made inactive. 8.1 Assets Unrestricted Assets (QuickBooks Bank Accounts) Only accounts which are open at the time of the current revision are described below. Multiple checking and savings accounts are indicated. See the Attachment to this manual for account numbers, online user ids and passwords. The attachment may not be posted on-line. Wells Fargo Checking Account Name Description Non interest-bearing disbursement account for operating funds. Deposits by to this account are made by the Administrative Assistant and Treasurer. The signers on the account are the Treasurer and Chancellor. Checking at Chase Unrestricted ING CDs Unrestricted Savings at ING Unrestricted Savings at Wells Fargo Savings at Chase Noninterest-bearing disbursement account at JPMorgan Chase Bank. Deposits and transfers are made to this account by the Treasurer. The Treasurer and Chancellor are signers on the account. Certificates of Deposits for unrestricted funds at ING Direct. See Attachment for details. Interest-bearing ING Direct Orange Business Savings account for unrestricted funds ( Treasurer and Chancellor may view, withdraw, and transfer funds. Savings account for unrestricted or board directed funds. The signers on the account are the Treasurer and Chancellor. Also holds funds from the sale of Point Reyes property. Unrestricted short term reserves. The signers on the account are the Treasurer and Chancellor. Page 9 of 93

10 Policy for Opening an Asset Account Checking, Savings, and CD accounts may be opened by the treasurer after authorization by the Diocesan Council. That authorization shall be documented in the minutes of the meeting of the Council. The motion for authorization shall specify the signers on the account. A minimum of two signers shall be designated for the account with the Chancellor of the Diocese and the Treasurer being signers, at a minimum. Checks shall only require one of the signatures. Statements shall be downloaded on-line by the Treasurer and stored with the monthly financial records after the account has been reconciled Account Balance Policy No single account shall have a balance in excess of the FDIC insured limit ($250,000 in 2009) for any extended period of time. The Treasurer shall consult with the Finance Committee as to whether new accounts should be opened and how funds should be allocated among the accounts Clearing Account Policy Clearing accounts within the checking account shall be funded from the appropriate temporarily restricted fund when funds must be disbursed by check. These accounts should be zero at the end of each month Accounts Receivable Account Name Assessment Receivables Description Receivables due the Diocese for Assessments Assessment Receivables:Assembly Assessments Receivables due the Diocese from parishes for Assessments for the Diocesan Assembly Assessment Receivables:Diocesan Percentage Assessment Receivables due the Diocese from parishes for the Diocesan Percentage Assessment (DPA) Assessment Receivables:Fair Share Assessments Life Giving Spring Loan Receivables due the Diocese for the payment of parish Fair Share Assessments to the Orthodox Church in America Interest-Free loan made to the Life Giving Spring Retreat Center in July Loans from Pt Reyes Funds Loans made out of funds from the sale of the St. Eugene Hermitage property in Point Reyes Loan to St. Mary Magdalene principal and accumulated interest from August 2009 Page 10 of 93

11 Orthodox Mission in Merced, CA Loan to Holy Assumption Monastery, Calistoga, CA LGS Ongoing Operations Monastery of St John of Shanghai Loan at 9% interest. July 2009 no interest loan Tracks loans to LifeGiving Spring Retreat Center from March 2009 until sale of property. March 2009 no interest loan to monastery Misc. Receivables Other Parish Receivables Portrait of American Saints Receivables Receivables from individuals due the Diocese for the repayment of personal items inadvertently charged to Diocesan Credit Card. Non-Assessment receivables due the Diocese from parishes. Receivables due the Diocese for the sale of the booklet Portrait of American Saints Stewardship Pledges Pledges due the Diocese for Stewards of the West Pledges Policy for Determining Parish Assembly Assessments The Diocesan Assembly is normally held once a year in October. The location of the Diocesan Assembly is rotated among the Deaneries of the Diocese. Parish Assembly Assessments should cover the cost of the assembly to the Diocese. The cost to the Diocese does not include the travel and lodging of parish delegates. The latter is the responsibility of the individual parish. The cost of the assembly to the Diocese shall be divided by the total number of parish members reported for Fair Share purposes on September 1 of the prior year. Mission Stations, monasteries, and Institutions of the Diocese do not pay an assembly assessment Policy for Determining Parish Diocesan Percentage Assessment (Rev. 10 Oct 2002) Purpose The purpose of this policy revision is to define the method of computing the parish Diocesan Percentage Assessment (DPA) and to redefine the factors that enter into what is the basis for that computation. Reference A Review of the Percentage Assessment Program, Diocese of the West, Orthodox Church in America, December 18, 1998 Page 11 of 93

12 Background The Diocesan Bishop is the hierarchical authority over all the parish communities within his jurisdiction. Each of the communities is a separate legal corporation and is responsible for the management of its own finances. In addition, each parish is expected to contribute to the financial support of the Bishop and the work of the Diocese. According to the Diocesan Bylaws, each parish must submit an annual financial report to the Diocese. The Diocesan Treasurer uses this report and other information to determine the amount of the parish assessment. The Diocesan Percentage Assessment is the primary means of financing the activities of the Diocesan Bishop and those who assist him with his responsibilities. This policy replaces the policy and related amendments enacted by the Diocesan Assembly from 1982 through Formula for the Computation The total DPA for a parish for the current year shall be 9% of the average of the parish net income and expenses as derived from the previous year s annual report. The parish shall pay the annual DPA in monthly installments. Each installment is one-twelfth of the annual amount, rounded to the nearest multiple of.05. The average of income and expenses was selected instead of just income in order to reduce the fluctuation of DPA from year to year. Deriving the Net Income and Expenses The Diocesan Treasurer shall begin computing the assessment by recording the parish gross income and gross expenses figures from the parish annual report that covers the previous calendar year. The Diocesan Treasurer shall next subtract the following items from gross income and expenses: Donor-restricted income and associated expenditures, pass-through income and expenses, Fair Share, DPA, and Diocesan Assembly assessments received in the report year. Charity expenses are subtracted from both the gross income and expenses. Mortgage payments from capital campaign funds for the primary place of worship as well as rent for such space shall also be deducted from gross income and expenses in order to encourage church growth. The following are not deducted: All American Council (AAC) assessments and bequests that do not specify a particular use. Deducting the AAC assessment would cause a large reduction in Diocesan income each year in which an AAC is held. Full or Partial Exemptions from the DPA 75% exemption during the first year a mission community or station becomes a mission and/or receives an assigned priest Page 12 of 93

13 50% exemption the second year after a mission community or station becomes a mission with an assigned priest 25% exemption the third year after a mission community or station becomes a mission with an assigned priest Parishes, Mission Communities, Mission Stations with 10 or fewer members are eligible for full exemption. The Diocesan Council is authorized to approve further exemptions from Diocesan assessments based on parish income and expenses. Parishes requesting such an exemption must apply in writing to the Diocesan Council. The full DPA is due until any reduction is authorized by the Diocesan Council. Delinquent Payments The Diocesan Treasurer shall include in the Monthly Treasurer s Report those parishes with outstanding assessments. It is the responsibility of the Deans to monitor this report and take appropriate action when parishes are 60 days or more behind in their assessment payments. Definitions Parish Annual Financial Report this report shall include either an income or cash flow statement for all funds as well as a balance sheet. Income Statement This report shall list all sources and uses of cash in a fund and totals the category amounts for the year. The clergy compensation category must be itemized to show salary, housing, medical insurance, life insurance, pension, and miscellaneous for each clergy paid by the parish. Balance Sheet the balance sheet as a minimum shall show the balances of all bank accounts, investment instruments, and property market values. It should also show amounts owed. Restricted Funds funds that hold monies legally restricted by donors as to their disbursement. The donor legally restricts a donation by indicating on the check or envelope a restricted fund or item that is to receive the donation. Pass Through Monies collections that are completely disbursed in the same calendar year. The disbursements do not result in a material benefit to the parish Policy on Invoicing Parishes for the Fair Share Assessment The Orthodox Church in America (TOCA) determines the Fair Share Assessment due from diocesan parishes by determining what percentage of its budget the diocese as a whole must support. The percentage is based on the total number of members reported by diocesan parishes. The Orthodox Church in America computes the amount of the assessment owed by the Diocese for the following year. Page 13 of 93

14 The Diocesan Council determines how the annual assessment owed to TOCA will be allocated among its parishes. The current allocation is determined by the number of parish members reported to TOCA. A per member amount to be paid by parishes is then voted upon at a Diocesan Council meeting. The Treasurer invoices each parish monthly at 1/12 of the parish per member amount. The membership of mission stations and missions with 10 or fewer members is not reported to TOCA. The latter parishes, as well as others determined by the Director of Missions, are not invoiced for the Fair Share Assessment. If a parish cannot immediately pay both monthly assessments, the Fair Share assessment shall have priority over the Diocesan Percentage Assessment Loans to Parishes or Institutions Only the Diocesan Council may authorize a loan from Diocesan unrestricted funds to a parish or Diocesan Institution Policy on Personal Expenses Charged on Diocesan American Express Card The Diocese acknowledges that occasionally air fare and/or car rental charges for personal travel may inadvertently be charged to the Diocesan American Express Card by an authorized user of the card. The Treasurer will invoice that person for the amount charged in error Other Current Assets (Inventory) Account Name Saints of America Inventory Description Value of the current physical inventory of the booklet Portrait of American Saints Other Current Assets (Unrestricted Cash) Account Name Description Petty Cash Undeposited Funds The amount of Petty Cash provided to the Diocesan Office in San Francisco for which no expense receipts have yet been received. The Value of checks recorded as income but not yet deposited into the checking account. Page 14 of 93

15 Petty Cash Policy It is the policy of the Diocese to maintain a petty cash fund at the Diocesan Office of $ The petty cash shall be under lock and key at all times. Disbursements from the petty cash fund may only be made for budgeted and/or approved office expenditures. A receipt must accompany every disbursement. The receipt must be signed by the person disbursing the reimbursement from petty cash and the person receiving the cash as a reimbursement. Receipts for petty cash shall be submitted to the Treasurer at the end of every month. The Treasurer shall replenish the petty cash fund as needed. The petty cash check shall be made out to the individual primarily responsible for maintaining the fund, with the word agent following that person s name Other Current Assets (Temporarily Restricted Assets) Mesirow Financial Account Name Temporarily Restricted Assets: Mission Board LCBA Savings Description Account to hold excess funds from the sale of the Point Reyes property in September CDs and interest earning Government Trust Fund. Interest-bearing annuity account at Loyal Christian Benefit Society. Seeded from a donor directly to support Missions Temporarily Restricted Funds Policy Funds donated to the Diocese of the West for a specific purpose shall be treated as Temporarily Restricted Funds if the total amount donated is expected to be disbursed for that purpose. These funds are not available to the Diocese for ordinary operating expenses. If funds collected exceed the requirements of the specified purpose, then the Diocesan Council shall designate, if possible with donor consultation, to what purpose the remaining funds shall be disbursed Board Designated Funds Savings accounts may have sub accounts for board designated funds. They are indicated with a suffix of - BD. Account Name Description Legal Fund Set Aside - BD Board Designated Funds set aside annually from the unspent legal expense budget Page 15 of 93

16 Matushka Activities Set Aside - BD Board Designated Funds set aside from operating budget in 2006 for use for Matushka activities Mission Director Salary Reserve - BD Sale of Point Reyes - BD Board Designated Funds set aside for future use as salary for a Director of Missions. Board Designated Funds set aside for the purpose of tracking the income and expenses from the funds from the sale of the property at Point Reyes, CA. All expenses from this fund must have prior approval of the Diocesan Council Board Designated Funds Policy It is the policy of the Diocese of the West to treat board-designated funds as unrestricted net assets on the statement of financial position. The activity for board-designated funds will be included in the statement for Unrestricted Activities by Function Fixed Assets (Land and Buildings). Account Name Accum Depr - Vehicles Accum Depr - Leasehold Imps Accum Depr - Building Accum Depr - Furn and Equip Vehicles Description Accumulated depreciation on vehicles Accumulated depreciation on leasehold improvements Accumulated depreciation on buildings Accumulated depreciation on furniture and equipment Business automobiles and trucks, registered in the name of the business 720 Duboce House Shows equity in the San Francisco property as a result of paying off the mortgage for a now defunct parish. Life-Giving Spring Retreat Center Facility Construction Buildings - Operating Furniture and Equipment Shows equity in the Boulder, Colorado facility as a result of paying off part of its debt. Costs of building new facilities for use while construction is still going on Buildings owned for current use Capitalized and depreciable equipment, including capitalized repairs and improvements, costing in excess of $1,000 individually. Furniture and equipment for use in the Diocesan Office. Useful life exceeds one year Page 16 of 93

17 8.2 Liabilities Accounts Payable Accounts Payable Credit Card at Chase Account Name Description Accrued obligations due to the Diocese s vendors Accrued obligations to Chase Credit Card Policy on the use of the Diocesan Credit Cards The Diocesan Council shall designate the authorized users of the Diocesan American Express Cards. Authorized users of the American Express Card shall submit receipts for all expenses over $25.00 charged to the American Express Card. The Treasurer shall send each authorized user a copy of their statement and request verification and classification of the charges and the forwarding of all outstanding receipts. The Treasurer shall notify the cardholder of any missing receipts. If receipts have been lost, then the Treasurer shall note this on the American Express Statement next to the charge and attach any stating that the receipt has been lost. All receipts will be attached to the statement and stored with the financial records for the billing month Policy on the payment of vendor The Treasurer shall enter all routine invoices into QuickBooks when received. These invoices shall be paid by the due date. The Diocesan Council must approve all unbudgeted expenses before they are incurred. Page 17 of 93

18 8.2.2 Other Current Liabilities Account Name Direct Deposit Liabilities Payroll Liabilities Payroll Liabilities:Federal Withholding Description Obligation accrued to the Diocese when a direct deposit of payroll has been scheduled. Obligation is paid when the scheduled payment has been made to the employee s bank account. Obligations due to outside agencies for funds withheld from payroll Obligation to IRS of withheld Federal Income Tax Payroll Liabilities:Medicare Payroll Liabilities:Medicare:Company Payroll Liabilities:Medicare:Employee Payroll Liabilities:OCAPEN Payroll Liabilities:OCAPEN:Company Payroll Liabilities:OCAPEN:Employee PayrollLiabilities: OCAPEN: Employee: Bishop's Contribution Payroll Liabilities:OCAPEN:Employee:Mission Director Contribution Obligation to IRS of withheld Medicare Taxes. Only applicable for non-clergy employees Obligation to IRS of Employer Match of Medicare Tax withheld from employee. Obligation to IRS of Medicare Taxes withheld from employee payroll. Obligation to the OCA Pension Fund of withheld and deferred income. Obligation to the OCA Pension Fund for Mandatory employer contributions. Obligation to the OCA Pension Fund for the employee contributions withheld from pay. Obligation to the OCA Pension Fund for the Bishop s contributions withheld from pay Obligation to the OCA Pension Fund for the Mission Director s contributions withheld from pay Payroll Liabilities:Social Security Obligation to the IRS for Social Security Taxes (Only applicable for non-clergy employees) Payroll Liabilities:Social Security:Company Obligation to the IRS for the Company match of withheld employee social security. Payroll Liabilities:Social Security:Employee Obligation to the IRS for Social Security withheld from Employee pay. Page 18 of 93

19 Account Name Payroll Liabilities:State Withholding CA Chancellor Pension Withholding Description Obligation due to the State of California for withheld state income taxes Obligation due to the OCA Pension Fund from withholding pension contributions from the Chancellor's stipend. Contribution is made exclusively by the Chancellor Policy on the classification of clergy as employees Ordained clergy shall be considered as employee for Federal Income Tax purposes. Ordained clergy shall be issued W2 forms if any portion of their compensation is not a housing allowance. The withholding of Federal or State Income Taxes is voluntary on the part of both the parish and the clergy. W4 forms must be submitted annually in order for the Treasurer to withhold these taxes. The Treasurer shall not withhold Medicare or Social Security taxes from the pay of clergy employees, nor shall the parish be obligated to pay the company portion of these taxes. If voluntary withholding of income taxes is to be performed, income taxes should not be computed on the housing allowance portion of clergy compensation Policy on participation in the OCA Pension Plan (TBD) 8.3 Net Assets Currently this terminology is not being used on financial statements, since it is not clear how Net Assets are implemented in QuickBooks. Account Name Retained Operating Earnings Description Cumulative result of Operations Unrestricted Net Assets Temporarily Restricted Net Assets Permanently Restricted Net Assets Similar to Retained Earnings in commercial organizations, i.e. the cumulative result of operations. Unrestricted Net Assets are subject to creditor action. Funds, received for a designated purpose, which have not yet been expended. Funds received for a designated purpose, but only the investment earnings may be used for that purpose. The investment earnings are classified at Temporarily Restricted Net Assets until they are expended Page 19 of 93

20 8.4 Income Account Name Lights-on Income Lights-on Income:Assembly Income Lights-on Income:Book Sales Description Income to support the general operations of the Diocese Parish Assembly Assessment Income and Observer Fees Sales of Portrait of American Saints Booklet Lights-on Income:Fair Share from Parishes Fair Share income from Parishes Lights-on Income:DPA Diocesan Percentage Assessment Income Lights-on Income:Operating Investment Income Lights-on Income:Reimbursed Returned Check Charges Dividends & Interest Earned by unrestricted fund Income from parish to refund cost to the Diocese of their returned check Outreach (Stewards of the West) Outreach (Stewards of the West):General Stewardship Donations Outreach (Stewards of the West):Pledges Income from Stewards of the West donations and pledges to support outreach programs Stewards of the West Donations Income from Pledges to Stewards of the West Restricted Income Restricted Income:Direct Charity Restricted Income:Liturgical Fund Income Restricted Income:Mission Board Income Restricted Income:Mission Board Income:Donations for Missions Restricted Income:Mission Board Income:Mission Board Funds Annuity Int Restricted Income:Mission Board Income:St. Andrew Distributrion Restricted Income:Music Department Temporarily Restricted Income Temporarily Restricted Income directed to a particular charitable purpose. Temporarily Restricted Income for Liturgical Items Temporarily Restricted Income for Missions Donations for Missions LCBA annuity fund interest on Missions Fund Income from OCA from the St. Andrew Fund Temporarily Restricted income directed to the Music Department Page 20 of 93

21 8.4.1 Policy on Receipt of Funds All invoice payments and donations should be mailed to the Diocesan Office in San Francisco. All checks received in the mail shall be immediately endorsed. See procedure in Section 10 for processing receipts. 8.5 Expenses Lights on Expenses Wages (Clergy & Non-Clergy W2 Employees) Account Name Lights-on Expenses:Payroll Expenses:Gross Wages Description Gross Wages and housing allowance for employees working at the Diocesan Office in San Francisco (Other sub-accounts of Gross Wages are created as needed for additional employees) Policy on Classification of Clergy as Employees Ordained clergy, who work in the Office of the Diocese of the West in San Francisco, shall be considered employees for Federal Income Tax purposes. See Section for instructions on how to prepare their Form W Policy on Classification of Non-Clergy as Employees Non-clergy, who are hired to work in the Office of the Diocese of the West in San Francisco, shall be considered regular exempt employees. They shall be issued a hiring contract and provided with a list of their roles and responsibilities. See Section for instructions on how to prepare their Form W Lights on Expenses Stipends (Clergy & non-clergy Self-Employed Status) Account Name Lights-on Expenses:Payroll Expenses: Stipends Description Stipends paid to clergy and non-clergy workers who report or will report this income to the IRS as selfemployment income. This includes the Chancellor, Deans, and Treasurer Page 21 of 93

22 Policy on Classifying a Diocesan Worker as Self-Employed When a person is appointed or elected to fill a paid position with the Diocese of the West, that person shall declare in writing to the Treasurer that they will report this income to the IRS as self-employment income. They will receive a Form 1099 and the stipend will be reported as Non-Employee Compensation. If that person will not be reporting their income as self-employment income, they will be considered employees of the Diocese of the West and issued a Form W2 instead. In addition, the Bishop of the Diocese or a member of the Finance Committee shall use the following criteria to confirm the status of a worker as self-employed and inform the Treasurer as to the correct status to be applied. Common Law Employee Test: Workers are subject to the control of the Bishop and/or the Diocesan Council only as to the result to be accomplished and not as to the means and methods for accomplishing the result. IRS 20-Factor Test: The majority of the answers to the questions for those receiving mission stipends, stipends as Deans, or other self-employed Diocesan workers should fall into the SE column Lights on Expenses Employee Benefits Account Name Lights-on Expenses:Payroll Expenses:Employee Benefits Description Clergy and Non-clergy Employee Benefits paid by the Diocese of the West. Lights-on Expenses:Payroll Expenses:Employee Benefits:Diocesan Hierarch Benefits Lights-on Expenses:Payroll Expenses:Employee Benefits:Diocesan Hierarch Benefits:Health Insurance Lights-on Expenses:Payroll Expenses:Employee Benefits:Diocesan Hierarch Benefits:OCA Life Insurance Lights-on Expenses:Payroll Expenses:Employee Benefits:Diocesan Hierarch Benefits:OCA Pension Diocesan Hierarch Benefits paid by the Diocese Self -Explanatory Self-Explanatory Mandatory Diocesan contribution (6% of compensation) paid to the OCA Pension Plan. Page 22 of 93

23 8.5.4 Lights on Expenses Payroll Taxes and Other Payroll Expenses Account Name Lights-on Expenses:Payroll Expenses:Payroll Taxes:Medicare Taxes Lights-on Expenses:Payroll Expenses:Payroll Taxes:Social Security Tax Lights-on Expenses:Payroll Expenses:Penalties & Interest Lights-on Expenses:Payroll Expenses:Direct Deposit Fees Lights-on Expenses:Payroll Expenses: Workman's Comp Description Medicare Taxes Diocesan Share Social Security Taxes Diocesan Share Obligation due IRS for any late payment of withholding taxes Fees for QuickBooks Direct Deposit of employee paychecks to bank account. Workmans Compensation Insurance Paid by Diocese The Diocese shall pay Medicare and Social Security Taxes for non-clergy employees only Lights on Expenses Professional Fees Account Name Lights-on Expenses:Professional Fees:CPA Fees Lights-on Expenses:Professional Fees:Legal Fees Lights-on Expenses:Professional Fees:Notary Public Lights-on Expenses:Professional Fees: Investment Fees Description Fees paid to CPAs for Financial Reviews and Advice Fees paid to Lawyers and Law Firms Fees paid to Notary Public Fees paid to investment managers Policy on Payment of Invoices for Professional Fees The Treasurer shall pay invoices for fees that have been budgeted or for fees that have been approved by the Diocesan Council prior to the incurring of the fee for services. Page 23 of 93

24 8.5.6 Lights on Expenses Office Expenses and Supplies Account Name Lights-on Expenses:Office Expenses:Books & Publications Description Disbursements for business-related books and publications. Lights-on Expenses:Office Expenses:Bank Charges Lights-on Expenses:Office Expenses:CA Non-Profit Filing Fee Lights-on Expenses:Office Expenses:Church Tax & Law Subscriptions Lights-on Expenses:Office Expenses:Fort Ross Registration Lights-on Expenses:Office Expenses:OCA Liturgical Donation Lights-on Expenses:Office Expenses:Office Equipment Lights-on Expenses:Office Expenses:Office Supplies & Expenses Lights-on Expenses:Office Expenses:Postage Lights-on Expenses:Office Expenses:Postage: Bulk Fee Lights-on Expenses:Office Expenses:Telephone Lights-on Expenses:Office Expenses:Telephone: Diocesan Hierarch Cell Phone Bank Charges for Returned Checks and Online Banking through QuickBooks Filing Fee paid to California to update non-profit status. Due every 2 years. Subscriptions to Church & Tax Law, Treasurer Alert bulletins and on-line access to same information. Registration Fee for use of Fort Ross Chapel and Grounds for Fourth of July Annual Celebration Payment of Obligation to OCA for Liturgical Items supplied to Dioceses. (Usually billed annually) Disbursement for office equipment not capitalized. (Under $1,000) Disbursement for consumables not qualifying for capitalization. Disbursements for postage to Post Office, Fed Ex, Stamps.com Fee paid for Bulk Third Class Postal Permit Office and Cell Phone expenses Telephone Expenses paid to Verizon for cell phone and internet access Policy on Payment of Expenses for Office Supplies Disbursements may be made by the Treasurer for Office Supplies that are accompanied by a receipt. If the supplies are purchased with the Diocesan America Express Card, the purchaser must send the receipt to the Treasurer, otherwise, the purchaser will be invoiced by the Diocese for the expense. Page 24 of 93

25 8.5.7 Lights on Expenses Travel Account Name Lights-on Expenses:Travel:Travel for Auditing Function Description Disbursements paid for transportation, food, and lodging of Internal Auditors and Treasurer Lights-on Expenses:Travel:All American Council Lights-on Expenses:Travel:Chancellor's Advisory Committee Lights-on Expenses:Travel:Chancellor's Travel Lights-on Expenses:Travel:Council Meeting Travel Lights-on Expenses:Travel:Dean's Travel Lights-on Expenses:Travel:Diocesan Hierarch Travel Lights-on Expenses:Travel:Metropolitan Council Lights-on Expenses:Travel:Misc.Travel Lights-on Expenses:Travel:Seminary Visit Disbursements paid for transportation, food, and lodging for the Bishop to attend the All American Council. Disbursements paid for transportation, food, and lodging for the members of the Chancellor s Advisory Committee to attend meetings. Disbursements paid for transportation, food, and lodging for the Chancellor to perform duties assigned by the Bishop Disbursements paid for transportation, food, and lodging for the members of the Diocesan Council, and occasionally Deans, to attend a Diocesan Council Meeting. Disbursements paid for transportation, food, and lodging for the Deans to attend a meeting of the Deans. Also covers a Dean s travel within his Deanery if approved by the Bishop. Disbursements paid for transportation, food, and lodging for the Diocesan Hierarch for parish visits and Pan Orthodox meetings. Disbursements paid for transportation, food, and lodging for the Diocesan representatives to the Metropolitan Council to attend meetings of the Metropolitan Council Disbursements paid for transportation, food, and lodging for travel by Finance Committee to meetings or by prospective clergy to the Diocesan Office. Disbursements paid for transportation, food, and lodging for the Director of Missions and one Dean to visit OCA Seminaries once a year Policy on Payment or Reimbursement for Travel The Treasurer may reimburse travelers for expenses described in the above accounts only if the request for reimbursement is accompanied by receipts. Receipts are required for all expenses over $ Receipts may be sent to the Treasurer electronically. The Treasurer will pay travel expenses described in the above accounts and billed to the Diocesan Credit Card only if the Page 25 of 93

26 traveler furnishes receipts for those expenses. Otherwise the traveler will be invoiced for Credit Card Charges not supported by receipts Lights on Expenses Insurance and Property Expenses Account Name Lights-on Expenses: Insurance and Property: Property & Liability Insurance Description Insurance for General Liability and St. Eugene property Lights-on Expenses: Insurance and Property :LGS Support Lights-on Expenses: Insurance and Property: Bishop's Move & Furnishings Disbursements to Life-Giving Spring for 2009 operating expenses. Expenses for Diocesan Office and Bishop Residence Furnishings Lights on Expenses Clergy and Parish Resources Expenses Account Name Lights-on Expenses: Clergy and Parish Resources: OCA Clergy Assistance Prgm. Lights-on Expenses: Clergy and Parish Resources: Clergy Pre-Assignment Assesmt Description Annual Fee paid to OCA for Clergy access to counseling program Expense for professional assessment of clergy prior to assignment within the Diocese of the West Lights-on Expenses: Clergy and Parish Resources: Diocesan Loan Fund Development Lights-on Expenses: Clergy and Parish Resources: Liturgical Supplies Expenses to set up a Diocesan Loan Fund Expenses for Liturgical Supplies requested by Bishop for use at parishes and missions Lights on Expenses OCA Expenses Account Name Lights-on Expenses:OCA Expenses: Fair Share Paid to OCA Description Parish Fair Share paid to OCA Lights-on Expenses:OCA Expenses: All American Council Assessment OCA assessment for the All American Council Page 26 of 93